Is Order Imbalance Related to Information?
Sukwon Thomas Kim
University of California, Riverside
Hans R. Stoll
Vanderbilt University - Finance
November 16, 2009
This paper studies the relation between information and stock order imbalance using corporate earnings announcements. Before information is publicly announced, order imbalance is positively correlated with forthcoming earnings surprises, but it does not have reliable predictive power. When information is announced, order imbalance moves in the same direction of earnings surprise, and maintains a positive correlation with the past earnings surprise for at least a week. We further find that order imbalances after earnings announcements do not contain other forthcoming information. However, these order imbalances have a similar effect on stock prices as informed order imbalances do.
Number of Pages in PDF File: 47
Keywords: Order imbalance, earnings, information, trading pressure, earnings surprise
JEL Classification: G10, G14, M41
Date posted: May 5, 2008 ; Last revised: November 23, 2012